Question

Sherman Peterson is an attorney in Los Angeles. Peterson uses the direct write-off method to account for uncollectible receivables.At January 31, 2014, Peterson’s accounts receivable totaled $15,000. During February, he earned revenue of $18,000 on account and collected $19,000 on account. He also wrote off uncollectible receivables of $1,800 on February 28, 2014.

Requirements
1.Use the direct write-off method to journalize Peterson’s write-off of the uncollectible receivables.
2.What is Peterson’s balance of Accounts Receivable at February 28, 2014?

Answer 1

1) Bad debt expense (Debit) 1,800

Accounts receivable (Credit) 1,800

2) $12,200

Step-by-step explanation:

1) Write off method of accounting directly credits accounts receivable instead of creating a provision for doubtful debt. Therefore following entry is recognized

Bad debt expense (Debit) 1,800

Accounts receivable (Credit) 1,800

2) Ledger balance of accounts receivable is $ 12,200 calculated as follows:

Opening Balance (31 January 2014) 15,000

Add: Sales on account during February 18,000

Less: Collection during February (19,000)

Less: Written off (1,800)

Balance at 28 February 2014 $12,200